According to Minister for National Economy Mihály Varga, the European Commission mistakenly forecasts the general government budget deficit-to-GDP ratio to be 3% in 2013 and above 3% in 2014, but in spite of this, the Minister believes that Hungary “stands a fairly good chance” of exiting the EU’s Excessive Deficit Procedure in June.

The Minister spoke at a press conference in Budapest after the European Commission had signalled in its latest prognosis that they did not expect Hungary’s government budget deficit to GDP ratio to remain steadily below the 3% EU threshold.

He stated that the Government feels “as if the European Commission had applied a double standard yet again in its evaluation”.

At the press conference, however, he called the words of EU Commissioner for Economic and Monetary Affairs Olli Rehn “encouraging”, as the official had also hinted that he saw a chance for the lifting of the EDP against Hungary. On the other hand, the Minister disputed the assumption mentioned by the Commissioner that in order to reach that point the introduction of further fiscal adjustments would be necessary.

He said his impression was “as if the Convergence Programme had not been fully assessed, and that is why we call into question the 3% deficit figure forecast for this year.”

Minister Varga emphasized that the Government has always been and will continue to be committed to keeping the fiscal deficit below 3%. He reiterated what he had already stated, that there will be “no election-time budget” in 2014.

The Minister for National Economy stressed that there is no need to amend the 2013 Budget, and this year the Government can potentially implement some smaller fiscal adjustments – if required to convince the Commission – at its own discretion. The Ministry for National Economy does not think it likely that, as a result of continuing with the EDP, Brussels would decide to suspend the disbursement of cohesion funds to Hungary, he added.
The Minister was also of the opinion that it is “not right” that the Commission prescribes new fiscal corrections year after year for the Hungarian Government, as these adjustments as well as the money withheld from enterprise funding “result in a lower investment and employment rate.”
He also underlined that the number of institutions and other economic stakeholders voicing criticism about the EU’s economic policy has been on the rise: “Continents outside Europe find it much easier to recover from the crisis, as the EU has applied a remedy for combating the crisis which has deepened rather than solved it”, he said, adding that the constraint of a short-term fiscal balance was incapable of leading the EU’s economy to recovery.

In the Minister’s opinion it is a positive sign that the gap between the growth estimates of the European Commission and those of the Government of Hungary “is closing”. He noted that the GDP growth projection for this year was lowered by a few tenths of a percentage point in the Convergence Programme published by the Government in the middle of April, whereas in its latest report, the Commission revised Hungary’s growth forecast upwards by a similar degree.

(Ministry for National Economy)